U.S. stocks gained Monday on a sharp jump in oil prices boosted by geopolitical concerns following weekend terror attacks in Paris.
The major U.S. averages closed more than 1 percent higher, recovering some of their sharp declines last week.
Jeffrey Kleintop, chief global investment strategist at Charles Schwab, said history shows little economic impact from previous terror attacks in Europe. "As long as these attacks remain an isolated event, the market direction will (remain higher)," he said.
For the United States, "the bigger factor is the economic backdrop and what happens with the Fed," Kleintop said.
"I think there's a lot of wait and see. We had a nice bounce back in the market in the last six weeks and we're starting to roll over again. ... People are on edge. People don't want to panic," said Peter Boockvar, chief market analyst at The Lindsey Group.
"I think you're really going to focus on oil, focus on the 10-year. Not a lot of earnings reports, not a lot of economic news, so I think the focus is going to be on oil," said Peter Coleman, head trader at Convergex.
Energy gained more than 3 percent to lead S&P 500 advancers, as oil prices recovered from an earlier dip. The Energy SPDR (XLE) closed up 3.3 percent for its best day since Oct. 2 and fourth-best day this year.
U.S. crude oil futures reversed three-straight days of declines to settle up $1.00, or 2.45 percent, at $41.74 a barrel. Brent also held higher near $44.70 a barrel. Traders attributed most of the gains to short-covering following geopolitical concerns and said they would likely be temporary.
Telecommunications gained 2.1 percent as the second-best performer in the S&P 500.
The Dow transports closed half a percent higher after falling 1 percent in intraday trade as airlines weighed. Delta fell about 2.2 percent and American Airlines closed about 1.4 percent lower, both below their 50-day moving average for the first time since early October.
The Nasdaq composite recovered from an intraday dip as Apple gained 1.6 percent. Amazon reversed a 2 percent decline to close nearly 1 percent higher and the iShares Nasdaq Biotechnology ETF (IBB) closed about 0.4 percent higher.
"I think the positive tone to the market owes something to the fact that European shares moved higher," said John Lonski, chief economist at Moody's. He also noted some support from greater confidence in a gradual pace of rate hikes by the Federal Reserve.
European stocks held mostly higher after a series of coordinated terrorist attacks in Paris late Friday left more than a 100 dead and hundreds injured.
The Islamist militant group that calls itself "Islamic State" (ISIS) claimed responsibility for the attacks. France responded over the weekend by launching air strikes against IS targets in Syria.
"Obviously the markets are going to be largely overshadowed by the events in Paris over the weekend," said David Kelly, chief global strategist at J.P. Morgan Funds. "To some extent that might make markets fairly quiet (given the lack of financial and economic news)."
"Whenever you have a shock, markets tend to react immediately to that, but because it happened over the weekend I think markets have had time to digest it. (It's) very much a human tragedy as opposed to a market event," he said.
Futures held mildly lower after the November Empire Manufacturing index came in at minus 10.7 for a fourth-straight month of contraction. Overnight, futures opened sharply lower before attempting gains.
"It's no surprise that the manufacturing sector is in poor shape," said Janney Montgomery Scott's Chief Fixed Income Strategist Guy LeBas, noting the negative impact of the stronger U.S. dollar.
He added that expectations for a December rate hike have come down and could move closer to 50 percent as many uncertainties remain.
No other major economic data is due Monday. The key report for the week is the Federal Reserve meeting minutes due out Wednesday.
Treasury yields were little changed, with the 10-year yield at 2.27 percent and the near 0.85 percent.
The U.S. dollar traded nearly half a percent higher against major world currencies, with the euro at $1.068 after hitting its lowest level against the dollar since April. The yen traded near 123.18 yen against the dollar.
"For now it seems the market (is) just focusing on the Fed and the ECB, what they're going to do in December," said Athanasios Vamvakidis, head of European G10 FX Strategy at Bank of America Merrill Lynch.
Overnight, Asian stocks closed mostly lower, with tourism-related names among the worst performers as the Paris attacks weighed on sentiment. The Hang Seng and Nikkei both closed down more than 1 percent, while the Shanghai composite ended about 0.7 percent higher.
Japanese government data released overnight showed the world's third-largest economy shrank for a second consecutive quarter, a technical recession.
The closed up 30.15 points, or 1.49 percent, at 2,053.19, with energy leading all 10 sectors higher.
The Nasdaq closed up 56.73 points, or 1.15 percent, at 4,984.62.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, held near 18.
About three stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 865 million and a composite volume of 3.7 billion.
Gold futures settled up $2.70 at $1,083.60 an ounce.
— CNBC's Jenny Cosgrave contributed to this report.
On tap this week:
Earnings: Wal-Mart, Home Depot, TJX, Dick's Sporting Goods, JA Solar Holdings, Jack in the Box, La-Z-Boy
8:30 a.m.: CPI
9:15 a.m.: Industrial production
10 a.m.: NAHB survey
12:35 p.m.: Fed Gov. Jerome Powell at Clearing House conference
3:30 p.m.: Fed Gov. Daniel Tarullo on the financial system
4 p.m.: TIC data
4:10 p.m.: Former Fed Chairman Ben Bernanke on panel at Brookings
Earnings: Target, Lowe's, Staples, Salesforce.com, L Brands, Keurig Green Mountain, Fresh Market, Children's Place
New York Fed's William Dudley, Cleveland Fed's Loretta Mester, Atlanta Fed's Dennis Lockhart on panel at Clearing House Conference
8:30 a.m.: Housing starts
Noon: Dallas Fed President Rob Kaplan on economy and policy
Noon: Bernanke at Economic Club of New York luncheon
2 p.m.: FOMC Minutes
Earnings: Gap, Best Buy, Buckle, Williams Sonoma, Autodesk, JM Smucker, Intuit, Ross Stores, Mentor Graphics
8:30 a.m.: Initial claims
10 a.m.: Philadelphia Fed survey
12:30 p.m.: Atlanta Fed's Lockhart at Dekalb Chamber of Commerce
4:45 p.m.: Fed Vice Chairman Stanley Fischer on emerging Asia
Earnings: Abercrombie and Fitch, Foot Locker
9 a.m.: St. Louis Fed President James Bullard on economy and monetary policy
1 p.m.: San Francisco Fed President John Williams on monetary policy
*Planner subject to change.
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